Downward pressure on rates is a top concern for motor carriers as we head deeper into the current freight recession.
The subject certainly came up during our annual shipper-carrier roundtable earlier this month. I thought Peter Di Tecco, president of Armbro Transport, made an insightful observation on the matter.
Di Tecco believes the downward pressure on rates any particular carrier will face has much to do with how that carrier has positioned itself in the market place — through its equipment, performance and services. And its position in the marketplace will determine which kinds of shippers that carrier will be left to deal with.
A carrier that has emphasized a commitment to quality equipment, operations and service is more likely to attract the attention of shippers that care about such things, Di Tecco explained. I take his words seriously in part because Armbro Transport is a routine winner of our Shippers Choice Award for surpassing the benchmark of excellence for carrier performance set every year by shippers across the country participating in our research.
So is a carrier who has a reputation for quality service likely to get a significant rate increase this year or next? No — the economic climate and the cost pressure on shippers can’t be avoided. But if you are in the right position in the market place you will likely be able to negotiate something that is tolerable. As Di Tecco pointed out “When we negotiate with our customers, we look out for each other because if we are not in business they don’t have the service. And if they are not competitive then we won’t have their business.
Carriers who choose to compete primarily on price are often left to deal with shippers whose only concern is price and that can prove a very cutthroat relationship when capacity is as loose as it is right now.
So what are quality shippers looking for when selecting carriers? I think I have a pretty good idea thanks to research we have been conducting for several years now with the help of CITT and the Canadian Industrial Transportation Association. Our research aims to understand exactly which key performance indicators shippers value most during carrier selection.
While it’s true that price is the 3rd most important indicator for LTL selection and 2nd most important for TL selection, on-time performance has always been the top ranking concern, followed closely by the quality of customer service provided.
As the old saying goes, you reap what you sow.
We’ve got a lot more about the industry issues discussed at the roundtable coming up in our November/December issue of Motortruck Fleet Executive. Look also for highlights of the roundatble, which is sponsored once again by Shaw Tracking, as part of our Web tv show special.
With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics. All posts by Lou Smyrlis